Murdoch faces fight on dual-class share structure

Sep 11, 2013
<p>Investors call for end to family rule at Twenty-First Century Fox</p>

A proposal calling for dual-class shares to be abolished at Twenty-First Century Fox has been filed by Legal & General Assurance, on behalf of Hermes Equity Ownership Services, and the $415 m Nathan Cummings Foundation.

Arguing for a ‘one share, one vote’ policy instead of the current dual-class structure, the investors say that ‘despite owning only about 14 percent of outstanding shares, Murdoch controls nearly 40 percent of the voting power of the company, allowing him outsized power in determining the outcome of shareholder votes.’

They add that dual-class structures in general ‘distort incentives and increase agency costs by misaligning economic incentives and voting power.’ More specifically, the investors argue that ‘the Murdoch family’s effective control over the company has resulted in decisions that are not in public stockholders’ best interests.’

Meanwhile, Christian Brothers Investment Services (CBIS) has joined forces with British Columbia Investment Management Corporation to file a motion calling for an independent chair at Twenty-First Century Fox, a proposal that was also put forward in 2012. CBIS says the 2012 motion – filed after the News of the World phone-hacking scandal – received strong support from investors: almost a third (31 percent) of shares voted supported the call to split Murdoch’s dual board roles, while 66 percent of non-Murdoch family shareholders also voted in favor.

‘Given the dual-class share structure, the level of family control and the influence this may bring to the impending reorganization, it is particularly important for the company to have an independent chair who is empowered to challenge management and foster a culture of accountability,’ says CBIS.

Twenty-First Century Fox, which split from media conglomerate News Corp in June, is urging shareholders to vote against both proposals, arguing that the current voting structure ‘promotes stability and continuity in the leadership and management of the company’, allowing it to focus on long-term objectives. It also points out that the elimination of the dual-class policy would dilute the voting power of all existing Class B stockholders.

Despite opposing CBIS’ proposal, the board maintains that it acknowledges ‘investor concerns regarding the leadership structure’ and will continue to ‘consider the pros and cons of separating or combining the chairman and CEO positions.’

Both motions will be voted at the company’s annual general meeting in Los Angeles on October 18.

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